Enterprise Investment Scheme (EIS) - where to find vetted, superior companies to invest into?

janesmith

There are countless companies that are Enterprise Investment Scheme (EIS) eligible, but obviously these are very high risk ventures.

Are there any brokerages, introducers or other sources of EIS-eligible companies where they have diligently vetted companies, so that I'm more likely to invest in ones that are more likely to be successful?

Thanks.

sendu

There are the crowdfunding sites. Crowdcube charges 1.5% on entry, while Seedrs charge 7.5% of profits on exit.

The argument goes that Crowdcube let any only crap through, since they make money when you invest, even if the company fails, while Seedrs do more vetting because they are aligned with the companies making money.

That said, you really have to do your own vetting and shouldn't rely on the platform to do it for you. Diversify, and expect most to fail.

DrSyn

Having taken all of that high risk, once all the fees,charges, etc, has be has been extracted by the managers and the middle men,how much profit (if any) will you end up with?

They will extract at lot!

Lakeuk

18 months ago I was thinking of investing in a company that was using one of these sites for crowd funding, it was in a sector I had a little knowledge in and thought the idea was interesting though very high risk proposal in my view. In the end I decided against, in small part due to the pitch over egging their plans and that they had well known partners when in fact they were minors in the industry. But largely I was put of by the crowdfund platform it’s self, heavily marketing for investors cash but no interest after the pitch event has passed, I’ve no idea on their past successes. Plus thinking about it at the time I realised if the company was successful it would many years to get any return if any, and concluded I’d rather risk the money on a highly volatile FTSE100 share getting at least 6% per year dividends.

I’m keeping an eye on the company to see how they pan out, they’ve not launched yet, 6 months behind on their plans, they’ve spent the money on what they promised and they’ve also taken on more investment with better rights than the crowdfunders stake.

Another pitch in the same sector had someone wanting cash to take an idea to the next stage ‘to market’, reading what the idea was and where it was at, there was no way near ready for market, was pretty much a one band prototype knocked up in a bedroom where it was clear the developer had no idea he would have massive work to get integrate into the sector. While the pitch is glossy to bring the money in, it would be doomed to fail.

I’m also watching a local distillery that seem to do a crowdfunding round each year, I can’t see how an investor will ever get a return and if any they do it’ll be so small to not be worth the investment.

Currently reading about Sugru, they got crowd funding on Crowdcube, then 12 months later had a situation where the best course for the business was to sell the business, Crowdcube investors lost 90% of their investment.

cogito

Not sure that getting involved with Seedrs is a great idea at the moment.

https://www.altfi.com/article/5635_seedrs-suspends-its-own-shares-after-entering-advanced-stages-of-a-new-funding-round

Another of Woodford's investments.

bowlhead99

cogito wrote: »

Not sure that getting involved with Seedrs is a great idea at the moment.

https://www.altfi.com/article/5635_seedrs-suspends-its-own-shares-after-entering-advanced-stages-of-a-new-funding-round

Another of Woodford's investments.

Seedrs published a blog note on the same topic
https://www.seedrs.com/learn/blog/sunday-times-setting-the-record-straight

Whether or not they have 'recent progress and success', it is factual that they don't make profits yet (2018 report looked from their blog showed £3 million of revenues, but after costs, the performance ended up at £4m of loss). So inevitable that they will need to access capital for expansion and, practically, to stay in business.

For Seedrs, Crowdcube and the rest it is a volume game. If they only take 1.5% of the funds raised on the platform, they need to raise many hundreds of millions each year to cover the running costs. Lakeuk says, "largely I was put of by the crowdfund platform it’s self, heavily marketing for investors cash but no interest after the pitch event has passed". But the whole point of crowdcube existing is assist with the 'crowdsourced' fundraising. Beyond that, they don't do much, and shouldn't be expected to, other than provide a nominee service for small shareholdings and a communications channel (which is up to the directors of the company concerned, to decide how much they'll use).

Crowdcube and the like are not vetting every deal against your personal preferences to decide for you whether you have enough information to take a punt on buying in. Once you have bought in, you are a small (often tiny) private investor in an unlisted company, with as much rights as the articles of association give you, and as much contact time with the board of directors as you can negotiate for yourself.

mostwelcome

What you're describing sounds a bit like Wealth Club.

They do their own research report on any single companies that make it on to their (otherwise funds focused) site.

There are two single company EIS on there at the moment, I've invested in one (Acamar Films, which produces Bing the childrens TV show).

As for “more likely to be successful” I hear you but I'd echo @sendu comment here, diversify and expect some to fail (I wouldnt say most, but maybe as many as half to provide negative or zero return, and the more successful ones to be 5-8 years in the making rather than the mandatory three years). The research reports on Wealth Club do provide additional insight alongside the IM etc and I know one founder whose business didn't make it past their due diligence.

These days I'm always looking for a business that is already going well and needs the cash to expand, rather than already tailing off and needing the cash to give them a bit more breathing space. Unfortunately Sugru (through Crowdcube) fell into the latter category and I was unable to spot this through the enthusiasm of the pitch. I get why they would choose to preserve something of their own stakes and save their employees’ jobs etc. but it still feels a bit of a sucker punch to sell within a year. Fortunately I only did a small investment

Filo25

The only EIS investments I have made through Crowdcube were craft brewers and at least I get discounted beer for that

janesmith

mostwelcome wrote: »

What you're describing sounds a bit like Wealth Club.

They do their own research report on any single companies that make it on to their (otherwise funds focused) site.

There are two single company EIS on there at the moment, I've invested in one (Acamar Films, which produces Bing the childrens TV show).

As for “more likely to be successful” I hear you but I'd echo @sendu comment here, diversify and expect some to fail (I wouldnt say most, but maybe as many as half to provide negative or zero return, and the more successful ones to be 5-8 years in the making rather than the mandatory three years). The research reports on Wealth Club do provide additional insight alongside the IM etc and I know one founder whose business didn't make it past their due diligence.

These days I'm always looking for a business that is already going well and needs the cash to expand, rather than already tailing off and needing the cash to give them a bit more breathing space. Unfortunately Sugru (through Crowdcube) fell into the latter category and I was unable to spot this through the enthusiasm of the pitch. I get why they would choose to preserve something of their own stakes and save their employees’ jobs etc. but it still feels a bit of a sucker punch to sell within a year. Fortunately I only did a small investment

Thank you everyone for the feedback.

mostwelcome - WealthClub looks great, so I'll investigate further.

I don't have the resources to do the necessary level due diligence on these high risk EIS opportunities and so sources that do so are invaluable (not saying I don't do tons of research, but it's not close to being sufficient to determine the likelihood of success of such ventures). For instance, there is an investment house I've been in discussions with and following for several months who only launch about one EIS opportunity in a whole year. They have an army of staff who investigate the dozens of EIS opportunities that they come across every year and, after their exhaustive research, only launch the one or so that passes their very stringent due diligence.

So looking for similarly pernickety sources. If anyone knows, I'd welcome the information.